APA sees silver lining to Petronas exit

Australian gasline operator APA Group says future acquisitions including its bid for rival operator Hastings Diversified Utilities Fund may benefit from the exit of Malaysia’s Petronas by removing the need for Foreign Investment Review Board approval.

Petronas, Malaysia’s state-run oil company, sold its 17.3 per cent stake in APA on Tuesday as part of a rationalisation of its global infrastructure assets. APA’s shares closed over six per cent lower yesterday at $4.85. The sale came as the Australian Competition and Consumer Commission investigates whether to block APA’s $841 million bid for HDUF in which APA owns a 20 per cent stake. The deal would also have required FIRB approval given Petronas held more than a 15 per cent stake in the buyer.

APA managing director Mick McCormack told the Financial Review:“It’s not an intended consequence but it is a fact that now Petronas is off the register, we no longer have the FIRB constraints.

Doubts about APA’s chance of success with the Hastings deal increased last month after the ACCC published an issues paper on the transaction highlighting a number of broad concerns. The ACCC’s paper concluded that APA’s proposals to sell a half share in the SEA gas pipeline from Victoria to Adelaide and cap prices on the Moomba to Adelaide pipeline for five years, “would not address competition concerns".

A decision is expected in the coming weeks. Mr McCormack said it was unclear if Muri Muhammad, Petronas’s representative on the APA board would be replaced.

“It’s a little bit premature to speculate on Muri’s position but the board will consider what it needs to consider and make a decision in due course. For the time being he remains." Petronas is also a shareholder in the Santos-led Gladstone liquefied natural gas (GLNG) export project.